Definition of Santa Claus Rally

What is the "Santa Claus rally"? What is the definition of the term "Santa Claus rally"?

The "Santa Claus rally" refers to the phenomenon of the markets rallying between Christmas and New Year's Day.

This late-year rally is attributed to a number of different factors.

Some believe that the rally is due to the fact that people are feeling good due to the time of year, and decide to invest some more of their hard-earned money in the markets before the year is out.

Some believe that the rally comes as a result of many people on Wall Street receiving their bonuses, which they put to work back in the markets.

The general consensus is that the "Santa Claus Rally" occurs due to investors positioning themselves in the markets ahead of the "January effect." This "January effect" is a general buoyancy in the markets that generally takes place in January after many investors create capital losses in order to offset their gains. After this tax-related selling is over, the markets generally rebound in January.